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1. Two firms are competing, Cournot style i.e they produce a homogeneous good and each chooses the quantity to supply simultaneously. Firm 1 has
1. Two firms are competing, Cournot style i.e they produce a homogeneous good and each chooses the quantity to supply simultaneously. Firm 1 has constant marginal cost 0. Firm 2 has constant marginal cost c, where c 0, and c10. Market inverse demand is given by P=100-41-92- Solve for the best response functions of the two firms, and for the Nash equilibrium. How do equilibrium quantities change as c increases? How do firm 1's profit and firm 2's profit with a change with c?
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